Gen Digital Inc. (GEN) Earnings Call Transcript & Summary

Welcome to the Annual Meeting for NortonLifeLock Inc. Our host for today's call is Vincent Pilette, CEO. [Operator Instructions] I will now turn the call over to your host, Mr. Pilette. You may begin, sir.

Thank you, and good morning, everyone. On behalf of the Board, our management team and the employees of NortonLifeLock, I would like to welcome you to our 2021 Annual Meeting of Stockholders. Today's meeting is being recorded, and a replay will be available on the Investor Relations section of our website. Before proceeding with the business of the meeting, I would first like to introduce our directors, nominees and executive officers in attendance today. Our directors and other directors nominees in attendance today include Frank Dangeard, our Chairman of the Board; Sue Barsamian, Eric Brandt, Nora Denzel, Peter Feld, Ken Hao, Emily Heath and Sherrese Smith. Our executive officers and management who are in attendance study include Natalie Derse, CFO; Bryan Ko, Chief Legal Officer, Secretary and Head of Corporate Affairs; and Philip Reuther, Senior Director of our legal team. Also with us this morning are Jana Barsten and Candace Beyer of KPMG, our independent registered public accounting firm. We will be available to answer questions later in the meeting. At this time, Bryan Ko, our Chief Legal Officer will conduct the formal portion of the meeting and record the minutes. Then I will present an overview of NortonLifeLock's corporate strategy. Bryan?

Thank you. Good morning, and welcome. As a reminder, today's annual meeting is being conducted live via webcast, and all participants are attending virtually. By conducting the meeting virtually, NortonLifeLock hopes to encourage greater attendance among stakeholders -- stockholders, while expanding the ability for stockholders to communicate with management. Today's meeting allows our stockholders to attend and ask questions of management regardless of their location. As a reminder, this meeting is being conducted in accordance with our bylaws and meeting rules of conduct. The agenda and rules of conduct are also posted on the Investor Relations website at investor.nortonlifelock.com. Our online pre-meeting stockholder forum has been open for questions prior to this meeting, and we welcome your additional questions during this meeting. If you have any questions regarding any of the 4 proposals on the agenda and you have not submitted them already, we ask that you please submit your proposal-related questions now via the Ask a Question tool on the virtual annual meeting platform to ensure we have sufficient time to answer your questions before the polls close. If you haven't done so already and you would like to submit a non-proposal-related question to management at this meeting, you may also do so via the Ask a Question tool on the virtual annual meeting platform. All questions will be submitted to the rules of the conduct of the meeting. We have allocated time at the end of the meeting to answer company-related questions. Any unanswered questions will be answered after the meeting with responses available on our Investor Relations website. We have an affidavit from Broadridge, certifying the stockholders of record as of July 19, 2021, were mailed the company proxy materials on or about July 28, 2021. The affidavit of mailing and notice will be included with the minutes of this meeting. Kathy Wheadon from Broadridge has been appointed to serve as the Inspector of Elections. Ms. Wheadon, who is in attendance at this meeting, has taken the oath of office and is prepared to serve. Ms. Wheadon has advised me that we have a sufficient number of shares represented at this meeting to constitute a quorum. Accordingly, the meeting is duly constituted, and we may proceed with business. It is 9:04 a.m. on September 14, and the polls are now open for voting. They will close at the conclusion of the formal portion of this meeting. Until the polls close, any stockholder may revoke or change his or her vote on any matter online. However, once the polls close, no further ballots, proxies or votes or any revocations or changes will be accepted online. If you have previously voted via the Internet, telephone or mail, you do not need to take any further action. If you did not previously vote or wish to change your vote, you may do so now by following the instructions on the virtual annual meeting platform. I will now call upon Phil Reuther, Director, Legal, to introduce the proposals. Phil?

Thank you, Bryan. There are 4 proposals on the agenda today. The first proposal is to elect 9 nominees to NortonLifeLock's Board of Directors. The Board's nominees for election to the Board of Directors are: Sue Barsamian, Eric Brandt, Frank Dangeard, Nora Denzel, Peter Feld, Ken Hao, Emily Heath, Vincent Pilette, Sherrese Smith. We did not receive any other nominations for director. The second proposal is to ratify the appointment of KPMG to serve as NortonLifeLock's independent registered public accounting firm for the 2022 fiscal year. The third proposal is an advisory vote to approve our executive compensation. The fourth proposal is a stockholder proposal regarding an independent Board Chairman, which is described on Pages 30 to 32 of the proxy statement. At this time, I will ask the representative of the proponent of proposal 4, Mr. John Chevedden, to address the meeting. Mr. Chevedden is a qualified representative of Kenneth Steiner, the stockholder proponent of the fourth proposal. Mr. Chevedden, as a reminder, the chair of this meeting has allocated 15 minutes for proposal 4 to be presented. We will notify you when you have reached your allotted time for the proposal. Operator, please open Mr. Chevedden's line.

Hello. This is John Chevedden. Can you hear me okay?

Yes, Mr. Chevedden, we can.

Proposal 4, Independent Board Chairman. Shareholders request that the Board of Directors adopt the policy to require the Chair of the Board of Directors be an independent member of the Board whenever possible. This proposal topic won 52% support at Boeing and 54% support at Baxter International in 2020. NortonLifeLock shareholders gave an impressive 40% support to this proposal topic in 2019. This impressive support may have represented a near majority vote from the NortonLifeLock shares that have access to independent proxy voting advice. Meanwhile, the management view on this topic is getting a free ride on the back of small shareholders, who do not have access to proxy voting advice that is independent of NortonLifeLock management. Now is a good time to adopt this proposal topic since our stock is below its 2017 price of $32. Poor stock performance is an incentive for adoption of this proposal topic. This 44 -- this 40% support was in spite of management including an electioneering statement on the ballot itself. And management also discourage shareholders from even reading the 2019 proposal. Management even spent shareholder money to unsuccessfully petition the Securities and Exchange Commission in an effort to prevent NortonLifeLock shareholders from voting on their 2019 proposal on this topic. The roles of Chairman and CEO are fundamentally different and should be held by 2 directors, a CEO and a Chairman, who is completely independent of the CEO and the company. The role of the CEO and management is to run the company. The role of the Board of Directors is to provide independent oversight of management and the CEO. Thus, there is potential conflict of interest for a CEO to have the role of overseeing himself. The 2020 Lowe's Annual Meeting proxy said Lowe's Directors determined that having a separate Chairman and Chief Executive Officer affords the CEO the opportunity to focus his time and energy on managing the business and allows the Chairman to devote his time and attention to Board oversight. Please vote yes, Independent Board Chairman, Proposal 4.

Thank you, Mr. Chevedden. NortonLifeLock's Board of Directors recommends a vote against proposal 4 for the reasons stated in the proxy statement. We will now pause to review any questions submitted on the proposals. We will only address questions related to the proposals at this time. No proposal-related questions have been submitted. We will now proceed to voting on the agenda items I just described. It is now 9:09 a.m. Pacific Time on September 14 and the polls are closed. No additional ballots, proxies or votes, changes or revocations will be accepted. I will now ask Ms. Wheadon of Broadridge to give the report on the preliminary voting results.

As Inspector of Elections, I have completed the preliminary tally of the votes. Based on the proxies and ballots received, the preliminary results of the voting are as follows: Proposal 1, each of the Board's 9 nominees has been elected to the Board of Directors. Each nominee was elected by a majority of the votes cast. Proposal 2, to ratify the appointment of KPMG LLP to serve as NortonLifeLock's independent registered public accounting firm for the 2022 fiscal year has been approved by the affirmative vote by holders of at least the majority of the shares of the company's common stock who attended the meeting either in person or by proxy. The advisory vote to approve the company's executive compensation has been approved by the affirmative vote by holders of at least a majority of the shares of the company's common stock who attended the meeting either in person or by proxy. The fourth proposal, the stockholder proposal regarding Independent Board Chairman, has been approved by the affirmative vote by holders of at least a majority of the shares of the company's common stock who attended the meeting either in person or by proxy.

Thank you, Kathy. A final report by the inspector of elections will be included with the minutes of this Annual Meeting of Stockholders. In addition, we will report the final voting results on our Investor Relations website and in a current report on Form 8-K within 4 business days from today. I will now return the floor to Mr. Pilette.

Thanks, Phil. This ends the formal portion of our meeting. There being no further business to come before the meeting, this meeting is now adjourned. We will now proceed with an overview of NortonLifeLock's strategy. I will take a few minutes to share the significant progress our company has made over the fiscal year and our vision to drive growth and continue to bring to market industry-leading solutions in consumer cyber safety. We hope you will come away from this presentation with a clear understanding of who we are, our goals and how we plan to build on what we have achieved this year to realize our full potential. The digitization of the world and the overlap between physical and digital world is growing rapidly. We have a vision that everyone has the right to live their digital lives safely. We are transforming how people think about cyber safety, how people consume it and benefit from it. We were the first to create an integrated cyber safety platform, which we believe will get us closer to achieving our vision. We now span more than 150 countries with roughly 3,000 employees, dedicated to protecting 80 million users and hundreds of millions of devices and digital identities around the world. We want to give all of our customers the control and the confidence to feel safe in this complex digital world. In today's world, we are using devices and connecting digitally across many aspects of daily lives. And we are seeing how consumer behavior and additional exposure online is driving the need and desire for cyber safety. According to our recent Norton Cyber Safety Insights Report, nearly 330 million people across our top 10 countries were victims of cybercrimes in the past year alone, and it's costing people dearly. For example, in the U.S., more than $38 billion was lost to cybercrimes and 40 million Americans experienced identity theft in 2020. When it comes to data privacy, 78% of consumers say that they are concerned. And while 83% want to do more to protect their online privacy, nearly half of those say that they don't know how. Consumers' lives have dramatically changed. So much of life happens online now that digital life is just life. Shopping, banking, working and now learning, streaming or even socializing are all at our fingertips today. But unfortunately, as we all accelerate our digital lives, we are also opening new doors for cybercriminals. Criminals have increased their threat sophistication and will continue to do so. In addition to the traditional forms of malware, spamming or phishing attacks, we've seen the emergence of ransomware, cryptojacking and botnets in order to access or steal our personal information. It is clear that cybercrime has become a big business. Cybercriminals are causing real damage as our digital lives merge with every element of our daily lives. If there is something that you value online, you will need to protect it because chances are that one day, it will be attacked. And while there are 5 billion global Internet users, swiping, clicking, sharing and living their lives online, the penetration of cybersecurity is still relatively small. Our mission is to continue to drive innovation in online privacy, security and identity protection as the global leader in cybersafety to help protect billions of people from today's cyber threats. To deliver on our vision, we have our key capabilities that we are constantly refining to adjust to the market opportunities. We make them fit better together to build an integrated cybersafety platform. Consumer insights with constant improvements and customer experience is supported by the largest and strongest service organization in consumer cybersafety. We are increasing our investment to create a single and consistent experience across all of our products, localizing where it makes sense. We have a vast portfolio developed by over 1,000 engineers with leading technologies. From stand-alone products to comprehensive plans, we look to protect everyone with innovative and easy-to-use products. We are focused on accelerating the pace of our new releases, whether they are new features, products or platform upgrades. We also have a hero brand, Norton, that inspires trust globally. We are doubling down into our hero brand to reach out to new cohorts and expand internationally. And we have other well-recognized brands such as LifeLock and Avira that are use case specific. Our ability to manage multiple brands allows us to differentiate where it matters. Our global reach is diverse, from strategic alliances to direct relationships. We are accelerating our go-to-market investments. After increasing our marketing spend, we are now focused on growing our operations in key international markets, going direct to consumers and through partnerships. The glue that brings these capabilities together is our relentless focus on execution. We operate with discipline. We continuously drive to increase productivity. We scrutinize and prioritize our investments. We also use our capital to accelerate our transformation with acquisitions, as you have seen recently with the acquisition of Avira or the proposed acquisition of Avast. Overall, we use every lever in a disciplined fashion to sustainably meet our commitments in pursuit of our vision. We are dedicated to protecting and empowering everyone to live their digital lives safely. Our passion drives us to set big goals. We want happy customers. Improving customer experience is key to achieving our vision. We want to double our Net Promoter Score, or NPS, to world-class well over 70. Cybersafety must give people the peace of mind they want to live their digital lives safely. We also want cybersafety to have the biggest reach. Today, 80 million people are experiencing some sort of protection from NortonLifeLock, from free basic products to full platform access. Of those, about 50 million are paying customers benefiting from our value proposition. Our goal is to double it. We will build on our cybersafety platform and push its boundaries by adding new adjacent trust-based solutions. We have a fantastic growth opportunity in front of us, targeting to achieve double-digit top line growth and that translates to a growing and sustainable profitability profile. As a mission-driven company, corporate responsibility is at the core of who we are and how we bring our vision to protect and empower consumers to live their lives safely. We believe in our mission, and we know that being a good business is good for business. Our key program objectives are to raise awareness of NortonLifeLock as a privacy leader, to invest in high-impact nonprofits, bringing in more women and underrepresented groups to cybersecurity and technology, to establish NortonLifeLock as an environmentally responsible business, to leverage our leading expertise in technology and cybersafety to help protect communities and finally to drive opportunities for employees' volunteering and giving. We bring together our team, expertise and powerful technology to support environmental, social and governance priorities that build a safe, inclusive and sustainable future. When it comes to environmental impact, we've made strong progress in many areas. For example, 90% of our products are now delivered digitally. And in fiscal year '21, we reduced Scope 1 and 2 greenhouse gas emissions by 52% year-over-year. We make it a priority to give back to those in our community. Last year, we gave $2 million to charity and approximately 10,000 nonprofit libraries and families received product donations. [ Around 21% ] of our employees participated in philanthropic and volunteering programs. We operate with integrity in everything we do and celebrate diversity as a driver of innovation. In fact, 56% of our Board of Directors are diverse and 33% of our global workforce is female. We know we have still a lot of work to do, but we are proud of our commitment, focus and dedication to corporate responsibility. Last week, we released our first Environmental, Social and Governance Report, and I encourage every one of you to check it out on our website. It is a privilege for me to lead this company. And while we have already accomplished a lot since we launched NortonLifeLock, I still very much feel as though we are just getting started. We've embarked on a mission to build the most comprehensive cybersafety platform and expand it with trust-based digital solutions. And our vision is very clear. We know exactly where we want to go. In short, our future is very bright. Thank you, and we'll now take your questions.

Thank you, Vincent. We did not receive any questions from stockholders at our 2021 Annual Meeting of Stockholders. This concludes the meeting. Thank you for attending NortonLifeLock's 2021 Annual Meeting of the Stockholders. We appreciate your support.

This now concludes the meeting. Thank you for joining, and have a pleasant day.